**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

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**Form 10-Q**

| **x**                                             |   | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|---------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------|
| **For the quarterly period ended March 31, 2007** |
| **OR**                                            |
| **o**                                             |   | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**Forthe transition period from           to**

** **

**CommissionFile Number 0-191551**

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**Atlantic Tele-Network, Inc.**

(Exact name of registrantas specified in its charter)

| **Delaware**                                                     |   | **47-0728886**                           |
|------------------------------------------------------------------|--------|------------------------------------------|
| (State or other  jurisdiction of  incorporation or organization) |   | (I.R.S. Employer  Identification Number) |

 

**10Derby SquareSalem, MA 01970(978) 619-1300**

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** **

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filing requirementsfor the past 90 days.   Yes x   No o

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer” and “largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check One):

| Large accelerated  filer  o |   | Accelerated  filer  x |   | Non-accelerated  filer  o |
|---------------------------------------|--------|---------------------------------|--------|-------------------------------------|

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act):   Yes o   No x

As of May 10, 2007, theregistrant had outstanding 15,190,462****shares of its common stock ($.01par value).

 

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**ATLANTICTELE-NETWORK, INC.**

FORM 10-QQuarter Ended March 31, 2007
| CAUTIONARY  STATEMENT REGARDING FORWARD LOOKING STATEMENTS |   |                                                                                                |
|------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------|
|                                                       |   |                                                                                                |   |   |
| PART I—FINANCIAL  INFORMATION                    |   |                                                                                                |
|                                                       |   |                                                                                                |   |   |
| Item 1                                                |   | Unaudited Condensed Consolidated Financial Statements                                               |   | 4 |
|                                                       |   |                                                                                                |   |   |
|                                                       |   | Condensed Consolidated Balance Sheets at  December 31, 2006 and March 31, 2007                 |   | 4 |
|                                                       |   |                                                                                                |   |   |
|                                                       |   | Condensed Consolidated Statements of Operations for  the three months ended March 31, 2006 and 2007 |   | 5 |
|                                                       |   |                                                                                                |   |   |
|                                                       |   | Condensed Consolidated Statements of Cash Flows for  the three months ended March 31, 2006 and 2007 |   | 6 |
|                                                       |   |                                                                                                |   |   |
|                                                       |   | Notes to Unaudited Condensed Consolidated Financial  Statements                                     |   | 7 |
|                                                       |   |                                                                                                |   |   |
| Item 2                                                     |   | Management’s Discussion and Analysis of Financial  Condition and Results of Operations         |   | 16 |
|                                                       |   |                                                                                                |   |   |
| Item 3                                                     |   | Quantitative and Qualitative Disclosures About Market  Risk                                         |   | 28 |
|                                                       |   |                                                                                                |   |   |
| Item 4                                                     |   | Controls and Procedures                                                                             |   | 28 |
|                                                       |   |                                                                                                |   |   |
| PART II—OTHER  INFORMATION                       |   |                                                                                                |
|                                                       |   |                                                                                                |   |   |
| Item  1.                                                   |   | Legal  Proceedings                                                                                  |   | 29 |
|                                                       |   |                                                                                                |   |   |
| Item1A                                                     |   | Risk Factors                                                                                        |   | 29 |
|                                                       |   |                                                                                                |   |   |
| Item 2.                                                    |   | Unregistered Sales of Equity Securities and Use of  Proceeds                                        |   | 29 |
|                                                       |   |                                                                                                |   |   |
| Item 6.                                                    |   | Exhibits                                                                                            |   | 29 |
|                                                       |   |                                                                                                |   |   |
| SIGNATURES                                                 |   |                                                                                                |   |   |
|                                                       |   |                                                                                                |   |   |
| CERTIFICATIONS                                             |   |                                                                                                |

 

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** **

**Cautionary Statement Regarding Forward-LookingStatements**

This Quarterly Report on Form 10-Q (or the “Report”) containsforward-looking statements relating to, among other matters, the futurefinancial performance and results of operations of ATN and its subsidiaries,including the relative contributions of Commnet and Sovernet; the competitiveenvironment in our key markets demand for our services and industry trends; theoutcome of litigation and regulatory matters; our continued access to thecredit and capital markets; the pace of our network expansion and improvement,including our realization of the benefits of these investments; and management’splans and strategy for the future.  Theseforward-looking statements are based on estimates, projections, beliefs, andassumptions and are not guarantees of future events or results.  Actual future events and results could differmaterially from the events and results indicated in these statements as aresult of many factors, including, among others, (1) significant political andregulatory risk facing our exclusive license to provide local exchange and longdistance telephone services in Guyana; (2) any significant decline in the priceor volume of international long distance calls to Guyana; (3) increased competitionaffecting our businesses; (4) the regulation of rates that GT&T may chargefor local wireline telephone service; (5) significant tax disputes betweenGT&T and the Guyanese tax authorities; (6) the derivation of a significantportion of our U.S. wireless revenue from a small number of customers;  (7) our ability to maintain favorable roamingarrangements; (8) economic, political and other risks facing our foreignpolitical operations; (9) regulatory changes affecting our businesses; (10)rapid and significant technological changes in the telecommunications industry;(11) our reliance on a limited number of key suppliers and vendors for timelysupply of equipment and services relating to our network infrastructure; (12)any loss of key members of management; (13) the adequacy and expansioncapabilities of our network capacity and customer service system to support ourcustomer growth; (14) dependence of our wireless and wireline revenues on thereliability and performance of our network infrastructure; (15) the occurrenceof severe weather and natural catastrophes; (16) the likely reduction of oureconomic interest in our Bermuda affiliate in 2008; and (17) our ability torealize the value that we believe exists in businesses that we acquire. These andother additional factors that may cause actual future events and results todiffer materially from the events and results indicated in the  forward-looking statements above are setforth more fully under Item 1A “Risk Factors” of our Annual Report on Form 10-Kfor the  year ended December 31, 2006(the “2006 Form 10-K”), which is on file with the SEC.  We undertake no obligation to update theseforward-looking statements to reflect actual results, changes in assumptions orchanges in other factors that may affect such forward-looking statements.

In this Report the words “we,”“our,” “ours” and “us” refer to Atlantic Tele-Network, Inc. and itssubsidiaries, unless the context indicates otherwise. ClearChoiceTM is a servicemark of one of our subsidiaries. This Report also contains other trademarks,service marks and trade names that are the property of others.

Reference to dollars ($)refer to U.S. dollars unless otherwise specifically indicated.

Information regarding shares of our common stock setforth in this Report has been retroactively adjusted to reflect our 5-for-2stock split on March 31, 2006.

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**PART I—FINANCIAL INFORMATION**

**Item 1.  Unaudited Condensed Consolidated FinancialStatements**

**ATLANTIC TELE-NETWORK, INC. ANDSUBSIDIARIES****CONDENSED CONSOLIDATED BALANCE SHEETS****(Unaudited)****(Dollars in thousands, except per shareamounts)**
| ** **                                                                                                                                                                                                                                  | ** ** | **December 31,  2006** | ** ** | **March 31,  2007** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|--------------------------|------------|
| **ASSETS**                                                                                                                                                                                                                                  | ** ** | ** **                  | ** ** | ** **               | ** ** |
| **CURRENT ASSETS:**                                                                                                                                                                                                                         | ** ** | ** **                  | ** ** | ** **               | ** ** |
| Cash and cash  equivalents                                                                                                                                                                                                                  |       | $                           | 60,543     |                     | $          | 56,708 |   |
| Accounts  receivable, net of allowances                                                                                                                                                                                                     |       | 20,510                      |       | 22,273                   |       |
| Materials and  supplies                                                                                                                                                                                                                     |       | 7,578                       |       | 6,444                    |       |
| Prepayments and  other current assets                                                                                                                                                                                                       |       | 2,508                       |       | 1,463                    |       |
| Total current  assets                                                                                                                                                                                                                       |       | 91,139                      |       | 86,888                   |       |
| **FIXED ASSETS:**                                                                                                                                                                                                                           | ** ** | ** **                  | ** ** | ** **               | ** ** |
| Property, plant,  and equipment                                                                                                                                                                                                             |       | 237,006                     |       | 247,364                  |       |
| Less accumulated  depreciation                                                                                                                                                                                                              |       | (98,433                     | )          | (104,607                 | )          |
| Net fixed assets                                                                                                                                                                                                                            |       | 138,573                     |       | 142,757                  |       |
| **INTANGIBLE ASSETS:**                                                                                                                                                                                                                      | ** ** | ** **                  | ** ** | ** **               | ** ** |
| Licenses                                                                                                                                                                                                                                    |       | 20,641                      |       | 22,066                   |       |
| Goodwill                                                                                                                                                                                                                                    |       | 35,583                      |       | 39,136                   |       |
| Customer  relationships, net                                                                                                                                                                                                                |       | 3,509                       |       | 3,184                    |       |
| **INVESTMENT IN AND ADVANCES TO  UNCONSOLIDATED AFFILIATES**                                                                                                                                                                                |       | 12,004                      |       | 11,539                   |       |
| **OTHER ASSETS**                                                                                                                                                                                                                            |       | 1,165                       |       | 1,994                    |       |
| Total assets                                                                                                                                                                                                                                |       | $                           | 302,614    |                     | $          | 307,564 |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                                                                                              | ** ** | ** **                  | ** ** | ** **               | ** ** |
| **CURRENT LIABILITIES:**                                                                                                                                                                                                                    | ** ** | ** **                  | ** ** | ** **               | ** ** |
| Accounts payable  and accrued liabilities                                                                                                                                                                                                   |       | 19,252                      |       | 16,594                   |       |
| Dividends  payable                                                                                                                                                                                                                          |       | 2,146                       |       | 2,149                    |       |
| Accrued taxes                                                                                                                                                                                                                               |       | 7,301                       |       | 9,275                    |       |
| Advance payments  and deposits                                                                                                                                                                                                              |       | 3,813                       |       | 3,951                    |       |
| Other current  liabilities                                                                                                                                                                                                                  |       | 2,529                       |       | 2,449                    |       |
| Total current  liabilities                                                                                                                                                                                                                  |       | 35,041                      |       | 34,418                   |       |
| **DEFERRED INCOME TAXES**                                                                                                                                                                                                                   |       | 12,871                      |       | 13,102                   |       |
| **LONG-TERM DEBT**                                                                                                                                                                                                                          |       | 50,000                      |       | 50,000                   |       |
| Total  liabilities                                                                                                                                                                                                                          |       | 97,912                      |       | 97,520                   |       |
| **MINORITY INTERESTS**                                                                                                                                                                                                                      |       | 25,932                      |       | 25,522                   |       |
| **COMMITMENTS AND CONTINGENCIES  (Note 9)**                                                                                                                                                                                                 | ** ** | ** **                  | ** ** | ** **               | ** ** |
| **STOCKHOLDERS’ EQUITY:**                                                                                                                                                                                                              | ** ** | ** **                  | ** ** | ** **               | ** ** |
| Preferred stock,  $.01 par value per share; 10,000,000 shares authorized, none issued and  outstanding                                                                                                                                      |       | —                      |       | —                   |       |
| Common stock,  $.01 par value per share; 50,000,000 shares authorized; 15,651,018 and  15,651,018 shares issued, respectively, and 15,170,707 and 15,190,462 shares  outstanding on December 31, 2006 and March 31, 2007, respectively |       | 157                         |       | 157                      |       |
| Treasury stock,  at cost                                                                                                                                                                                                                    |       | (3,557                      | )          | (3,361                   | )          |
| Additional  paid-in capital                                                                                                                                                                                                                 |       | 104,356                     |       | 105,003                  |       |
| Retained  earnings                                                                                                                                                                                                                          |       | 79,599                      |       | 84,371                   |       |
| Accumulated  other comprehensive loss                                                                                                                                                                                                       |       | (1,785                      | )          | (1,648                   | )          |
| Total  stockholders’ equity                                                                                                                                                                                                            |       | 178,770                     |       | 184,522                  |       |
| Total liabilities and  stockholders’ equity                                                                                                                                                                                            |       | $                           | 302,614    |                     | $          | 307,564 |   |

 

The accompanying condensed notes are an integralpart of these condensed consolidated financial statements.

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**ATLANTICTELE-NETWORK, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSFOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2007(Unaudited)(Dollars in thousands, except per share amounts)**
| ** **                                                                                              | ** ** | **Three Months Ended  March 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                                              | ** ** | **2006**                                         | ** ** | **2007** | ** ** |
| **REVENUE:**                                                                                            | ** ** | ** **                                       | ** ** | ** ** | ** ** |
| Wireless                                                                                                |       | $                                                | 13,312     |   | $ | 18,172 |   |
| Local telephone  and data                                                                               |       | 9,191                                            |       | 11,467 |   |
| International  long distance                                                                            |       | 11,171                                           |       | 12,920 |   |
| Other                                                                                                   |       | 847                                              |       | 978 |   |
| Total revenues                                                                                          |       | 34,521                                           |       | 43,537 |   |
| **OPERATING EXPENSES:**                                                                                 | ** ** | ** **                                       | ** ** | ** ** | ** ** |
| Termination and  access fees *(excluding depreciation and amortization,  presented below)*              |       | 5,285                                            |       | 6,177 |   |
| Internet and  programming *(excluding depreciation and amortization,  presented below)*                 |       | 750                                              |       | 849 |   |
| Engineering and  operations *(excluding depreciation and amortization,  presented below)*               |       | 4,347                                            |       | 5,764 |   |
| Sales and  marketing *(excluding depreciation and amortization,  presented below)*                      |       | 1,930                                            |       | 5,096 |   |
| General and  administrative *(excluding depreciation and amortization,  presented below)*               |       | 4,847                                            |       | 5,850 |   |
| Depreciation and  amortization                                                                          |       | 5,793                                            |       | 6,501 |   |
| Total operating expenses                                                                                |       | 22,952                                           |       | 30,237 |   |
| Income from  operations                                                                                 |       | 11,569                                           |       | 13,300 |   |
| **OTHER INCOME (EXPENSE):**                                                                             | ** ** | ** **                                       | ** ** | ** ** | ** ** |
| Interest expense                                                                                        |       | (867                                             | )          | (225 | ) |
| Interest income                                                                                         |       | 205                                              |       | 594 |   |
| Other, net                                                                                              |       | 278                                              |       | 387 |   |
| Other income  (expense), net                                                                            |       | (384                                             | )          | 756 |   |
| **INCOME BEFORE INCOME TAXES,  MINORITY INTERESTS AND EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES** |       | 11,185                                           |       | 14,056 |   |
| Income taxes                                                                                            |       | 6,465                                            |       | 6,664 |   |
| **INCOME BEFORE MINORITY  INTERESTS AND EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES**               |       | 4,720                                            |       | 7,392 |   |
| Minority  interests, net of tax of $1.0 million and $0.9 million, respectively                          |       | (1,097                                           | )          | (949 | ) |
| Equity in  earnings of unconsolidated affiliates                                                        |       | 466                                              |       | 455 |   |
| **NET INCOME**                                                                                          |       | $                                                | 4,089      |   | $ | 6,898 |   |
| **NET INCOME PER SHARE:**                                                                               | ** ** | ** **                                       | ** ** | ** ** | ** ** |
| Basic                                                                                                   |       | $                                                | 0.33       |   | $ | 0.46 |   |
| Diluted                                                                                                 |       | $                                                | 0.33       |   | $ | 0.45 |   |
| **WEIGHTED AVERAGE COMMON SHARES  OUTSTANDING:**                                                        | ** ** | ** **                                       | ** ** | ** ** | ** ** |
| Basic                                                                                                   |       | 12,486                                           |       | 15,151 |   |
| Diluted                                                                                                 |       | 12,544                                           |       | 15,321 |   |
| **DIVIDENDS PER SHARE APPLICABLE TO COMMON STOCK**                                                      |       | $                                                | 0.12       |   | $ | 0.14 |   |

 

The accompanying condensed notes are an integralpart of these condensed consolidated financial statements.

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**ATLANTICTELE-NETWORK, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2007(Unaudited)(Dollars in thousands)**
| ** **                                                                                              | ** ** | **Three Months Ended   March 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------|------------|
| ** **                                                                                              | ** ** | **2006**                                               | ** ** | **2007** | ** ** |
| **CASH FLOWS FROM OPERATING ACTIVITIES:**                                                               | ** ** | ** **                                             | ** ** | ** ** | ** ** |
| Net income                                                                                              |       | $                                                      | 4,089      |   | $ | 6,898 |   |
| Adjustments to  reconcile net income to net cash flows provided by operating activities:                |       |                                                   |       |   |   |
| Depreciation and  amortization                                                                          |       | 5,793                                                  |       | 6,501 |   |
| Gain on sale of  investments in unconsolidated affiliates                                               |       | —                                                 |       | (133 | ) |
| Amortization of  deferred compensation                                                                  |       | 128                                                    |       | 214 |   |
| Deferred income  taxes                                                                                  |       | 265                                                    |       | 231 |   |
| Minority  interests                                                                                     |       | 1,097                                                  |       | 949 |   |
| Equity in  earnings of unconsolidated affiliates                                                        |       | (466                                                   | )          | (455 | ) |
| Dividends  received from Bermuda Digital Communications, Ltd.                                           |       | 415                                                    |       | 484 |   |
| Changes in  operating assets and liabilities, excluding the effects of acquisitions:                    |       |                                                   |       |   |   |
| Accounts  receivable, net                                                                               |       | 543                                                    |       | (1,763 | ) |
| Materials and  supplies, prepayments, and other current assets                                          |       | (377                                                   | )          | 2,472 |   |
| Other assets                                                                                            |       | (373                                                   | )          | (692 | ) |
| Accounts payable  and accrued liabilities, advance payments and deposits and other current  liabilities |       | (168                                                   | )          | (2,599 | ) |
| Accrued taxes                                                                                           |       | 1,951                                                  |       | 1,371 |   |
| Net cash  provided by operating activities                                                              |       | 12,897                                                 |       | 13,478 |   |
| **CASH FLOWS FROM INVESTING  ACTIVITIES:**                                                              | ** ** | ** **                                             | ** ** | ** ** | ** ** |
| Capital expenditures                                                                                    |       | (5,086                                                 | )          | (8,943 | ) |
| Acquisitions of  businesses, net of cash acquired of $1,687 and $0                                      |       | (11,537                                                | )          | (6,503 | ) |
| Acquisitions of  assets completed by Commnet, net of cash acquired of $231 and $0                       |       | (8,192                                                 | )          | — |   |
| Proceeds from  sale of investments in unconsolidated affiliates                                         |       | —                                                 |       | 276 |   |
| Purchase of long  term marketable securities                                                            |       | 1,991                                                  |       | — |   |
| Net cash used in  investing activities                                                                  |       | (22,824                                                | )          | (15,170 | ) |
| **CASH FLOWS FROM FINANCING  ACTIVITIES:**                                                              | ** ** | ** **                                             | ** ** | ** ** | ** ** |
| Proceeds from  long-term debt                                                                           |       | 14,000                                                 |       | — |   |
| Repayment of  long-term debt                                                                            |       | (39                                                    | )          | — |   |
| Investments made  by minority shareholders in Commnet of Florida, LLC                                   |       | 370                                                    |       | — |   |
| Distributions to  minority shareholders                                                                 |       | (1,336                                                 | )          | (20 | ) |
| Dividends paid  on common stock                                                                         |       | (3,019                                                 | )          | (2,123 | ) |
| Net cash  provided by (used in) financing activities                                                    |       | 9,976                                                  |       | (2,143 | ) |
| **NET CHANGE IN CASH AND CASH  EQUIVALENTS**                                                            |       | 49                                                     |       | (3,835 | ) |
| **CASH AND CASH EQUIVALENTS,  beginning of the period**                                                 |       | 26,493                                                 |       | 60,543 |   |
| **CASH AND CASH EQUIVALENTS, end of the period**                                                        |       | $                                                      | 26,542     |   | $ | 56,708 |   |

 

The accompanying condensed notes are an integralpart of these condensed consolidated financial statements.

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**ATLANTIC TELE-NETWORK, INC. ANDSUBSIDIARIES****NOTES TO UNAUDITED CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**1.ORGANIZATION AND BUSINESS OPERATIONS**

Atlantic Tele-Network, Inc. (“ATN” or “Company”)provides wireless and wireline telecommunication services in the Caribbean andNorth America through the following operating subsidiaries and affiliates:

·                    GuyanaTelephone & Telegraph Company, Ltd. (“GT&T”), the nationaland international telephone company in the Republic of Guyana and the largestwireless service provider in that country. The Company has owned 80% of thestock of GT&T since January 1991. GT&T generated approximately 63%and 60% of the Company’s consolidated revenues for the three months ended March31, 2006 and 2007, respectively.

·                    Commnet Wireless,LLC (“Commnet”), an owner and operator of wholesale wireless networks in ruralareas of the United States. Commnet provides wireless voice and datacommunications roaming services primarily to national, regional and localwireless carriers. The Company completed its acquisition of 95% of Commnet onSeptember 15, 2005 and the remaining 5% on January 1, 2007.

·                    Sovernet, Inc.,(“Sovernet”), a facilities-based integrated voice, broadband datacommunications and dial-up service provider in New England, primarily inVermont. ATN acquired all of the outstanding common stock ofSovernet, Inc. on February 10, 2006 and, at the closing of thetransaction, issued shares of common stock of Sovernet, Inc. amounting to4% of Sovernet’s outstanding capital stock to Sovernet’s new Chief ExecutiveOfficer, subject to vesting requirements and other restrictions.

·                    BermudaDigital Communications, Ltd. (“BDC”), the largest wireless voice and datacommunications service provider in Bermuda, doing business under the name “CellularOne”. The Company acquired an equity interest in, and signed a managementcontract with, BDC in 1998. The Company currently owns 43% of the equity ofBDC.

·                    ChoiceCommunications, LLC (“Choice Communications” or “Choice”), is a provider offixed wireless broadband data and wireless digital television services, anddial-up Internet services to retail and business customers in the U.S. VirginIslands. Choice is a wholly owned subsidiary of the Company.

ATN provides management, technical, financial, regulatoryand marketing services for its subsidiaries and affiliates and typicallyreceives a management fee equal to approximately 4% to 6% of their respectiverevenues. Management fees from consolidated subsidiaries are eliminated inconsolidation. Management fees from unconsolidated affiliates are included in “OtherIncome” in the accompanying statements of operations.

In the third quarter of 2006, the Company completedthe sale of 3.84 million shares of common stock at $19.00 per share in anunderwritten public offering (the “2006 Equity Offering”), consisting of thesale by the Company of an aggregate of 2.64 million shares(2.4 million shares in July 2006 and an additional 0.24 millionshares purchased by the underwriters as a part of their over-allotment optionin August 2006) and 1.2 million shares by our Chairman, Cornelius B.Prior, Jr., and his related entities. The net proceeds to the Company of thisoffering, which were approximately $46.3 million, were used to repay aportion of the Company’s outstanding indebtedness, and will fund capitalexpenditures, acquisitions and/or strategic investments and general corporatepurposes. The Company did not receive any proceeds from the sale of shares ofthe selling stockholders.

**2.BASIS OF PRESENTATION**

The accompanying condensed consolidated financialstatements have been prepared by the Company pursuant to the rules andregulations of the Securities and Exchange Commission (“SEC”). The financialinformation included herein is unaudited; however, the Company believes suchinformation and the disclosures herein are adequate to make the informationpresented not misleading and reflect all adjustments (consisting only of normalrecurring adjustments) that are necessary for a 

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fair statement of theCompany’s financial position and results of operations for such periods. Theyear-end condensed balance sheet data was derived from audited financialstatements, but does not include all disclosures required by accountingprinciples generally accepted in the United States of America.  Results of interim periods may not beindicative of results for the full year. These condensed consolidated financial statements and related notesshould be read in conjunction with the Company’s 2006 Annual Report onForm 10-K.

*Consolidation*

The consolidated financial statements include theaccounts of the Company, its majority-owned subsidiaries and Commnet ofFlorida, LLC, which is consolidated in accordance with the provisions ofFinancial Accounting Standards Board (“FASB”) Interpretation No. 46, “Consolidationof Variable Interest Entities, an interpretation on Accounting ResearchBulletin No. 51” as revised in December 2003 since it was determinedthat the Company is the primary beneficiary of Commnet of Florida, LLC.

Except for the Company’s investment in Commnet ofFlorida, LLC, the equity method of accounting is used for the Company’sinvestments in affiliated entities in which the Company has at least a 20%ownership but does not have management control. The Company accounts for investmentsof less than 20% for which the Company does not have the ability to exertsignificant influence over the operations by using the cost method ofaccounting.

*RecentAccounting Pronouncements*

In February 2007, the FASB issued StatementNo. 159, *The Fair Value Option forFinancial Assets and Liabilities Including an Amendment of FASB StatementNo. 115*(“SFAS 159”)*.*This standard is effective for periods beginning after November 15, 2007,therefore, the Company will adopt the provisions of the standard onJanuary 1, 2008. SFAS 159 permits the Company to elect to measurecertain of its financial instruments at either historical cost or fair value.The Company is in the process of determining what method it will choose uponadoption and, once determined, the impact, if any, adoption will have on thefinancial results or position of the Company.

On January 1, 2007, the Company adopted FASBInterpretation No. 48, *Accounting for Uncertaintyin Income Taxes—an interpretation of FASB Statement No. 109*(“FIN 48”),which clarifies the accounting for uncertainty in tax positions. FIN 48requires that the Company recognize the impact of a tax position in the Company’sfinancial statements if that position is more likely than not of beingsustained on audit, based on the technical merits of the position. The adoptiondid not have a material impact on the results of operations or financial positionof the Company. 

The Company evaluated its uncertain tax positionsrelating to its various tax matters and rulings in Guyana and determined thatno adjustment was to be recorded to the estimated settlement amounts previouslyrecorded prior to the adoption of FIN 48. As noted in Note 11 to the 2006 Form10-K, due to various arrangements and relationships in place with thegovernment of Guyana, there is no expectation that interest and penalties willbe assessed upon reaching final settlement of the matters. There is no expectedsettlement date and upon settlement, which might not occur in the near future,the payment may vary significantly from the amounts currently recorded. TheCompany will continue to update amounts recorded as new developments arise.

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*Reclassifications*

The Company revised its presentation in the 2006statement of cash flows of dividends received from BDC of $0.4 million toproperly reflect the dividends as an operating activity as they represented areturn on the Company’s investment. Certain reclassifications have been made to the 2006 statement ofoperations to conform to the 2007 presentation.

**3.USE OF ESTIMATES**

Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the dates ofthe financial statements and the reported amounts of revenues and expensesduring the reporting periods. The most significant estimates relate to revenue recognition,allowance for doubtful accounts, useful lives of the Company’s fixed andfinite-lived intangible assets, allocation of purchase price to assets acquiredand liabilities assumed in purchase business combinations, fair value ofindefinite-live intangible assets, goodwill and income taxes. Actual resultscould differ significantly from those estimates.

**4.ACQUISITIONS**

*a)**           **Acquisition of Minority Interest in Commnet*

In connection with the Commnet merger agreement ofSeptember 2005, the Company also entered into a put and call agreement with the5% minority shareholder of Commnet to acquire the remaining 5% ownershipinterest. Under the terms of this agreement, the Company was obligated toacquire the remaining 5% ownership interest from the minority member betweenApril 15, 2007 and October 15, 2007. The purchase price wasdetermined on a fixed multiple to a predefined earnings number based on Commnet’sfinancial results during the 12 month period prior to the exercise of theput and call. The Company reached an agreement with the minority shareholder onJanuary 1, 2007 to purchase his ownership interest for $7.1 millionincluding cash and 21,000 shares of the Company’s common stock. EffectiveJanuary 1, 2007, Commnet is a wholly-owned subsidiary of the Company.

The acquisition of the 5% minority interest in Commnetwas accounted for using the purchase method. After eliminating the $1.3 million minority interest in Commnet, the Companyallocated $3.0 to goodwill, $1.7 to property and equipment and $1.1 tolicenses.  In accordance with currentaccounting standards, the goodwill will not be amortized and will be tested forimpairment at least annually as required by SFAS No. 142, *Goodwill and Other Intangible Assets* (“SFAS 142”). For taxpurposes, the Company elected to step up the basis of Commnet’s assets to fairmarket value, and therefore, the goodwill will be deductible for tax purposes.

*b)            Sovernet, Inc.*

On February 10, 2006, the Company completed the acquisition ofSovernet a facilities-based provider of communications services to business andresidential customers in Vermont, including bundled voice and high-speedInternet access, as well as traditional dial-up Internet services. Inconnection with the acquisition, ATN acquired all of the outstanding commonstock of Sovernet for approximately $13.2 million, including the repaymentof approximately $1.4 million in Sovernet debt and the payment of transactionexpenses of $0.5 million. At the closing of the transaction, the Companyissued shares of Sovernet’s common stock amounting to 4% of Sovernet’soutstanding capital stock to Sovernet’s new chief executive, subject to vestingrequirements and other restrictions.  TheCompany funded the transaction through a combination 

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of cash on hand and borrowings under its existingcredit facility (see Note 5). The acquisition of Sovernet allows theCompany to expand its local telephone and data business into the under-served,smaller markets of Vermont and northern New England.

The acquisition of Sovernet was accounted for usingthe purchase method and Sovernet’s results of operations sinceFebruary 10, 2006, the date of acquisition, have been included in thefinancial statements of the Company. The total purchase consideration wasallocated to the assets acquired and liabilities assumed at their estimatedfair values as of the date of acquisition as determined by management. Includedin this allocation was $5.0 million attributable to Sovernet’srelationships with its existing customers as of the date of acquisition. Theexcess of the purchase price over the amounts allocated to assets acquired andliabilities assumed has been recorded as goodwill. The Company originallyrecorded $8.1 million of goodwill in connection with the acquisition ofSovernet. However, such amount was reduced by $1.7 million (net of tax)during 2006 as a result of the Company’s recording of certain transactionswhich related to a pre-acquisition period. The value of the goodwill from thisacquisition can be attributed to a number of business factors including, butnot limited, to the reputation of Sovernet as a retail provider of Internet andtelephone services as well as a network operator, Sovernet’s reputation forcustomer care, the skills and experience of its management and staff and thestrategic position it holds in its marketplace. In accordance with currentaccounting standards, the goodwill will not be amortized and will be tested forimpairment at least annually as required by SFAS 142. The customerrelationships will be amortized, on an accelerated basis, over the expectedperiod during which their economic benefits are to be realized over a period ofapproximately five years. For tax purposes, the goodwill and amortizationof the customer relationships are not be deductible.

**5.CREDIT FACILITIES**

Long-term debtincludes the following (in thousands):

|                                                                                       | ** ** | **December 31,  2006** | ** ** | **March 31,  2007** | ** ** |
|---------------------------------------------------------------------------------------|------------|-----------------------------|------------|--------------------------|------------|
| Note payable to  CoBank, ACB by ATN under a $50 million term loan                     |       | $                           | 50,000     |                     | $          | 50,000 |   |
| Line of Credit,  payable to CoBank, ACB under a $20 million revolving credit facility |       | —                      |       | —                   |       |
|                                                                                  |       |                        |       |                     |       |
| Total long term debt                                                                  |       | $                           | 50,000     |                     | $          | 50,000 |   |

 

On September 15, 2005, ATN, as borrower, enteredinto a credit agreement with CoBank, ACB (the “CoBank Credit Agreement”). TheCoBank Credit Agreement provides a $50 million term loan (the “Term Loan”) anda $20 million revolving credit facility (the “Revolver Facility”, together withthe Term Loan, the “Credit Facility”). The Credit Facility is guaranteed by ourCommnet subsidiary and is collateralized by, among other things, a securityinterest in substantially all of the assets of and stock owned by ATN andCommnet. The Term Loan has principal repayments deferred until the maturity ofthe loan on October 31, 2010. Interest on the Term Loan is payable on aquarterly basis at a fixed annual interest rate of 5.85%, net of any patronagepayments received by the Company from the bank. Amounts outstanding under theRevolver Facility accrue interest at a rate equal to (at the Company’s option):(i) LIBOR plus a margin ranging from 1.25% to 1.50% or (ii) avariable rate of interest as defined within the Revolver Facility plus 1%.

The CoBank Credit Agreement contains certainaffirmative and negative covenants of ATN and its subsidiaries (includingCommnet) that are typical for loan facilities of this type. Among other things,these covenants restrict ATN’s ability to incur additional debt in the futureor to incur liens on its property. ATN has also agreed to maintain certainfinancial ratios under the facilities, including a total leverage ratio (debtto EBITDA) of two to one or less; a debt service coverage ratio (EBITDA to debtservice) of three to one or more; an equity to assets ratio of 0.4 to one ormore; and a specified leverage ratio for Commnet that changes over time. As ofMarch 31, 2007, the Company was in compliance with the covenants of the CoBankCredit Facility.

**6.  STOCK-BASED COMPENSATION**

During the three monthsended March 31, 2006 and 2007, the Company recognized $128,000 and $214,000,respectively, of non-cash compensation expense relating to grants under the1998 Stock Option Plan and 2005 Atlantic Tele-

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Network Restricted Stock Plan and Incentive Plan (the“Share Based Plans”).

During the three monthsended March 31, 2007, the Company did not grant any awards under either of theShare Based Plans.

**7.NET INCOME PER SHARE**

Net income per share is computed in accordance withSFAS No. 128, “Earnings Per Share.” Basic net income per share is computedby dividing net income by the weighted average number of common sharesoutstanding during the period and does not include any other potentiallydilutive securities. Diluted net income per share gives effect to allpotentially dilutive securities using the treasury stock method.

For the three months ended March 31, 2006 and 2007,the common shares issued under the Company’s 2005 Restricted Stock Plan andoptions issued under the Company’s 1998 Stock Option Plan were the onlypotentially dilutive securities.

The reconciliationfrom basic to diluted weighted average common shares outstanding is as follows(in thousands):

|                                                                             | ** ** | **Three Months Ended  March 31,** | ** ** |
|-----------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                  | ** ** | **2006**                                         | ** ** | **2007** | ** ** |
| Basic weighted average  common shares outstanding                           |       | 12,486                                           |       | 15,151 |   |
| Unvested shares  issued under the Company’s 2005 Restricted Stock Plan |       | 52                                               |       | 48 |   |
| Stock options                                                               |       | 6                                                |       | 122 |   |
| Diluted weighted average common shares outstanding                          |       | 12,544                                           |       | 15,321 |   |

 

**8.SEGMENT REPORTING**

The Company manages and evaluates its operations infive segments of which four are considered material for separate disclosureunder SFAS No. 131, “Disclosures About Segments of and Enterprise RelatedInformation*.”* Those four segments are:i) Integrated Telephony-International, which generates all of its revenuesin Guyana and has all of its assets located in Guyana (“GT&T”),ii) Integrated Telephony-Domestic, which generates all of its revenues andhas all of its assets located in the United States (“Sovernet”),iii) Wireless Television and Data, which generates all of its revenues inand has all of its assets located in the U.S Virgin Islands (“Choice”), andiv) Rural Cellular, which generates all of its revenues in the UnitedStates and has all of its assets located in the United States (“Commnet”). Theoperating segments are managed separately because each offers differentservices and serves different markets.

The followingtables provide information for each operating segment (in thousands):
| ** **                                                   | ** ** | **For the Three Months Ended March 31, 2006** | ** ** |
|--------------------------------------------------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **                                                   | ** ** | **Integrated  Telephony-  International**                                        | ** ** | **Integrated  Telephony-  Domestic** | ** ** | **Wireless  Television  and Data** | ** ** | **Rural  Wireless** | ** ** | **Corporate** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| Revenues                                                     |       | $                                                                                | 21,830     |   | $ | 2,130 |   | $ | 1,560 |   | $ | 9,001 |   | $ | 1,654 |   | $ | (1,654 | ) | $ | 34,521 |   |
| Depreciation and  amortization                               |       | 3,405                                                                            |       | 291 |   | 592 |   | 1,351 |   | 154 |   | — |   | 5,793 |   |
| Non-cash stock-based  compensation                           |       | —                                                                           |       | — |   | — |   | — |   | 128 |   | — |   | 128 |   |
| Operating income (loss)                                      |       | 9,783                                                                            |       | 488 |   | (915 | ) | 2,689 |   | (228 | ) | (248 | ) | 11,569 |   |
| Interest expense                                             |       | —                                                                           |       | — |   | (696 | ) | (103 | ) | (867 | ) | 799 |   | (867 | ) |
| Interest income                                              |       | 146                                                                              |       | 2 |   | — |   | 27 |   | 829 |   | (799 | ) | 205 |   |
| Income taxes                                                 |       | 4,743                                                                            |       | 275 |   | — |   | 1,046 |   | 401 |   | — |   | 6,465 |   |
| Equity in earnings of  unconsolidated affiliates, net of tax |       | —                                                                           |       | — |   | — |   | — |   | 4,754 |   | (4,288 | ) | 466 |   |
| Net income (loss)                                            |       | $                                                                                | 4,262      |   | $ | 207 |   | $ | (1,610 | ) | $ | 1,429 |   | $ | 4,089 |   | (4,288 | ) | $ | 4,089 |   |
|                                                              |            |                                                                                  |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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| ** **                                                   | ** ** | **For the Three Months Ended March 31, 2007** | ** ** |
|--------------------------------------------------------------|------------|----------------------------------------------------------------------------------|------------|
| ** **                                                   | ** ** | **Integrated  Telephony-  International**                                        | ** ** | **Integrated  Telephony-  Domestic** | ** ** | **Wireless  Television  and Data** | ** ** | **Rural  Wireless** | ** ** | **Corporate** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| Revenues                                                     |       | $                                                                                | 26,072     |   | $ | 3,633 |   | $ | 1,995 |   | $ | 11,837 |   | $ | 2,528 |   | $ | (2,528 | ) | $ | 43,537 |   |
| Depreciation and  amortization                               |       | 3,877                                                                            |       | 470 |   | 547 |   | 1,530 |   | 77 |   | — |   | 6,501 |   |
| Non-cash stock-based  compensation                           |       | —                                                                           |       | 32 |   | — |   | — |   | 182 |   | — |   | 214 |   |
| Operating income (loss)                                      |       | 9,536                                                                            |       | 294 |   | (689 | ) | 4,263 |   | 143 |   | (247 | ) | 13,300 |   |
| Interest expense                                             |       | —                                                                           |       | (3 | ) | (862 | ) | (167 | ) | (221 | ) | 1,028 |   | (225 | ) |
| Interest income                                              |       | 141                                                                              |       | 66 |   | — |   | 34 |   | 1,381 |   | (1,028 | ) | 594 |   |
| Income taxes                                                 |       | 4,607                                                                            |       | 149 |   | — |   | 1,705 |   | 203 |   | — |   | 6,664 |   |
| Equity in earnings of  unconsolidated affiliates, net of tax |       | —                                                                           |       | — |   | — |   | — |   | 5,628 |   | (5,173 | ) | 455 |   |
| Net income (loss)                                            |       | $                                                                                | 4,145      |   | $ | 199 |   | $ | (1,551 | ) | $ | 2,420 |   | $ | 6,884 |   | $ | (5,199 | ) | $ | 6,898 |   |

 

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| ** **             | ** ** | **Assets** | ** ** |
|------------------------|------------|------------|------------|
| **As of**         | ** ** | ** ** | ** ** | **Integrated  Telephony-  International** | ** ** | **Integrated  Telephony-  Domestic** | ** ** | **Wireless  Television  and Data** | ** ** | **Rural  Wireless** | ** ** | **Corporate** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| December 31, 2006 |       | $          | 142,670    |   | $ | 20,821 |   | $ | 12,061 |   | $ | 85,310 |   | $ | 186,865 |   | $ | (145,113 | ) | $ | 302,614 |   |
| March 31, 2007         |       | 141,387    |       | 20,901 |   | 11,774 |   | 94,525 |   | 175,380 |   | (136,403 | ) | 307,564 |   |
|                        |            |            |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

As of March 31, 2007 total assets for the IntegratedTelephony-Domestic and Rural Wireless segments include $7.0 million and $35.0million of goodwill, respectively.
| ** **                                       | ** ** | **Capital  Expenditures** | ** ** |
|--------------------------------------------------|------------|---------------------------|------------|
| **Three Months Ended  March 31,** | ** ** | ** **                | ** ** | **Integrated  Telephony-  International** | ** ** | **Integrated  Telephony  Domestic** | ** ** | **Wireless  Television  and Data** | ** ** | **Rural  Wireless** | ** ** | **Corporate** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| 2006                                             |       | $                         | 3,306      |   | $ | — |   | $ | 115 |   | $ | 1,665 |   | $ | — |   | $ | — |   | $ | 5,086 |   |
| 2007                                             |       | 4,916                     |       | 463 |   | — |   | 3,564 |   | — |   | — |   | $ | 8,943 |   |
|                                                  |            |                           |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

**9. COMMITMENTS AND CONTINGENCIES**

**Regulatory and Litigation Matters**

The Company and its subsidiaries are subject to certainregulatory and legal proceedings and other claims arising in the ordinarycourse of business, some of which involve claims for damages and taxes that aresubstantial in amount. The Company believes that, except for the itemsdiscussed below and in our 2006 Annual Report on Form 10-K as filed with theSEC, for which the Company is currently unable to predict the final outcome,the disposition of proceedings currently pending will not have a materialadverse effect on the Company’s financial position or results of operations.

***Regulatory***

The Company’s Guyana subsidiary, GT&T, is subject toregulation in Guyana under the provisions of its license and under the GuyanaPublic Utilities Commission Act of 1999 and the Guyana Telecommunications Actof 1990. GT&T also has certain significant rights and obligations under theagreement pursuant to which the Company acquired its interest in GT&T in1991 and because of the large volume of traffic that GT&T has with theUnited States, GT&T can be significantly affected by orders of U.S.regulatory agencies.

In a letter dated September 8, 2006, the NFMU agreedthat GT&T’s total spectrum fees should not increase for the years 2006 and2007. However, that letter implied that spectrum fees in 2008 and onward may beincreased beyond the amount agreed between GT&T and the Government.GT&T restated its position in a September 14, 2006 letter to theGovernment that, by agreement with the Government, spectrum fees should becapped until the NFMU develops a fee methodology.

On January 15, 2007, the Public Utilities Commission(the “PUC”) issued a ruling that fixed floor and ceiling rates for both the pre-paidand the post-paid cellular services offered by GT&T and itscompetition. In addition, the PUC ordered the companies to implement per-secondbilling as opposed to the pre-existing practice of per-minutebilling. Although GT&T will be permitted to match its competition’s rates,any reduction of rates and the implementation of per-second billing mayhave a material adverse effect on GT&T’s financial condition or results ofoperations.

In October 1997, the PUC ordered GT&T toincrease the number of telephone lines in service to a total of 69,278 lines bythe end of 1998; 89,054 lines by the end of 1999; and 102,126 lines by the endof 2000; to allocate and connect an additional 9,331 telephone lines before theend of 1998; and to provide to subscribers who request them facilities for calldiversion, call waiting, reminder call, and three-way calling by the endof 1998. In issuing this order, the PUC did not hear evidence or make anyfindings on the cost of providing these lines and services, the adjustment intelephone rates that may be necessary to give

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GT&T a fair return on its investment, or the waysand means of financing the requirements of the PUC’s order. GT&T hasappealed the PUC’s order to the Guyana Court of Appeal, and that appeal isstill pending. No stay currently exists against this order.

In July 2004, the FCC released an order revising thespectrum band plan applicable to the Broadband Radio Service and EducationalBroadband Service. These are the spectrum bands through which Choice operatesits video and broadband data services. The new rules restructure these spectrumbands and could impact Choice customers and operations. Choice requested anopportunity to opt-out of the new band plan. The FCC declined to adopt anopt-out provision, however, it stated that it will consider requests forwaiver of the new band plan requirements on a case-by-case basisand described the circumstances under which waivers would be granted. To date,the FCC has granted at least two waivers of the rebanding requirements toentities similar to Choice.  On April 30,2007, Choice filed a waiver request at the FCC that we believe the FCC islikely to grant.

In August 2006, the Bermuda Ministry ofTelecommunications and E-Commerce proposed a new regulatory framework forthe telecommunications industry. The proposal contemplates converting existingservice-specific licenses to licenses that permit any company to offerany type of service. At this time we do not know whether the outcome of thisproposal will be positive or negative for BDC.

For further information concerning other pendingregulatory matters, the disposition of which could have a material adverseeffect on the Company’s financial position or results of operations, see “Notesto Consolidated Financial Statements, Note 11, Commitments and Contingencies —Regulatory and Litigation Matters” in our 2006 Form 10-K.

***Litigation***

In Bermuda, our BDC affiliate is subject to Bermuda’sTelecommunications Act 1986, as amended. In November 2005, the Minister ofTelecommunications and Technology directed BDC to cease offering certain dataservices through its “Bull” branded wireless modem. BDC challenged thedirective in Bermuda court claiming that the directive contravenes BDC’slicense to provide data services and BDC’s long history of providing dataservices. On June 6, 2006, the court ruled in favor of BDC. The ministryfiled an appeal which is scheduled to be heard in June 2007.

Upon the acquisition of GT&T in January 1991,ATN entered into an agreement with the government of Guyana to significantlyexpand GT&T’s existing facilities and telecommunications operations and toimprove service within a three-year period pursuant to an expansion andservice improvement plan (the “Plan”). The government agreed to permit rateincreases in the event of currency devaluation within the three-yearperiod, but GT&T was unable to get timely increases when the Guyanesecurrency suffered a sharp decline in March 1991. The Plan was modified incertain respects and the date for completion of the Plan was extended toFebruary 1995. Since 1995, the PUC has had pending a proceeding initiatedby the minister of telecommunications of Guyana with regard to the failure ofGT&T to complete the Plan by February 1995. The PUC last held hearingson this matter in 1998. It is GT&T’s position that its failure to receivetimely rate increases in compensation for the devaluation of currency in 1991provides legal justification for GT&T’s delay in completing the Plan. Ifthe PUC were to find that GT&T was not excused from fulfilling the terms ofthe Plan by February 1995, GT&T could be subject to monetarypenalties, cancellation of its license, or other action by the PUC or thegovernment that could have a material adverse effect on the Company’s businessand prospects. The requirements of the Plan were substantially completed morethan four years ago. GT&T believes that its obligations have been fulfilledand it has continued to aggressively develop the telecommunicationsinfrastructure in all areas including landline, wireless and data.

GT&T is contesting income tax assessments ofapproximately $7.3 million that it has received from the commissioner ofInland Revenue for the years 1991-1996 based on the disallowance as adeduction for income tax purposes of five-sixths of the advisory feespayable by GT&T to the Company. The deductibility of these advisory feeswas upheld for one of these years by a decision of the High Court inAugust 1995. The Guyana Commission of Inland Revenue has filed a HighCourt Writ seeking an order setting aside that decision on the grounds that theCommissioner did not have a proper hearing. GT&T has contested that Writ.The assessments for the other years are being held in abeyance pending decisionon the Writ and GT&T motions to strike. Subsequent to December 31,2001, GT&T received assessments for the years 1997-2000 in theaggregate amount of approximately $6.5 million raising the same issues.GT&T expects that proceedings on these assessments will also be held inabeyance pending the Court’s decision.

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In November 1997, GT&T received assessments ofthe current equivalent of approximately $9.7 million from the commissionerof Inland Revenue for taxes for the years 1991 through 1996. It is GT&T’sunderstanding that these assessments stem from an audit that the Guyana HighCourt stayed before it was completed. Apparently, because the audit was cutshort as a result of the High Court’s order, GT&T did not receive noticeof, and an opportunity to respond to, the proposed assessments as is thecustomary practice in Guyana, and substantially all of the issues raised in theassessments appear to be based on mistaken facts. GT&T has applied to theGuyana High Court for an order prohibiting the commissioner of Inland Revenuefrom enforcing the assessments on the grounds that the origin of the audit andthe failure to give GT&T notice of, and opportunity to respond to, theproposed assessments violated Guyanese law. The Guyana High Court has issued anorder effectively prohibiting any action on the assessments pending the determinationby the High Court of the merits of GT&T’s application.

Should GT&T be held liable for any of the above taxliabilities, totaling $23.5 million, the Company believes that thegovernment of Guyana would be obligated to reimburse GT&T for any amountsthat would reduce GT&T’s return on investment to less than 15% per annumfor the relevant periods.

In early 2000, Inet Communications, Inc., anInternet service provider in Guyana, and the Guyana Consumers Association fileda suit in the High Court against the Attorney General of Guyana and GT&T.The suit claims that GT&T is not entitled to rate increases based on theagreement between the Government of Guyana and ATN and that the Civil Law ofGuyana prohibits what is referred to as GT&T’s monopoly. Inet’s motion wasstruck down for non-appearance of counsel. However, Inet’s counsel hasapplied for the matter to be restored. The Court has not yet taken action onInet’s application.

In July 2002 an individual sued the Attorney Generalof Guyana in the Guyana courts asking, among other things, for a declarationthat the section of the Company’s 1990 contract with the Government of Guyanagranting to GT&T an exclusive right to operate a telecommunications systemin Guyana was null and void as contrary to law and to the Constitution ofGuyana. GT&T has joined the suit to contest these claims and thisproceeding remains pending. In 2001, the Government of Guyana announced itsintention to introduce competition into Guyana’s telecommunications sector incontravention of the terms of GT&T’s license. The Company believes that thetermination of the exclusivity provisions of GT&T’s license would requireappropriate compensation to GT&T and a rebalancing of rates so that therates for each service represent the real economic cost of such services. TheCompany also believes that the government is considering shifting from rate ofreturn regulation to incentive rate-cap regulation. InFebruary 2002, GT&T began negotiations with the Government on theseissues and all other outstanding issues between GT&T and the Government ofGuyana. GT&T has not had formal discussions with Government officialsregarding rate regulation or the introduction of additional competition sincethe second quarter of 2002. The President of Guyana has publicly stated thatcompetition in the wireline and long distance sectors are key objectives of hisadministration. In recent informal discussions with GT&T, senior Guyaneseofficials indicated an interest in re-starting negotiations regarding theexclusivity terms of GT&T’s license, as well as other outstanding issues,such as certain tax matters. Although no schedule has been agreed to, we expectnegotiations to restart as early as mid-2007.

For further information concerning other pendinglitigation matters, the disposition of which could have a material adverseeffect on the Company’s financial position or results of operations,  see “Notes to Consolidated FinancialStatements, Note 11, Commitments and Contingencies — Regulatory and LitigationMatters” in our 2006 Form 10-K.

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**Item 2. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations**

This discussion should beread in conjunction with Management’s Discussion and Analysis of FinancialCondition and Results of Operations included in our Form 10-K. Some of thestatements in the discussion are forward-looking statements which are subjectto risks, uncertainties and other factors that could cause actual results todiffer materially from future results expressed or implied by suchforward-looking statements. These risk factors include those discussed underItem 1A, “Risk Factors” in our 2006 Form 10-K and those set forth in thisReport under “Cautionary Statement Regarding Forward-Looking Statements.”

**OVERVIEW**

We providewireless and wireline telecommunications services in the Caribbean and NorthAmerica through the following operating subsidiaries and affiliate:

·       GuyanaTelephone & Telegraph Company, Ltd. (or GT&T), the nationaland international telephone company in the Republic of Guyana and the largestwireless service provider in that country. We have owned 80% of the equity ofGT&T since January 1991.

·       CommnetWireless, LLC (or Commnet), an owner and operator of wholesale wirelessnetworks in rural areas of the United States. Commnet provides wireless voiceand data communications roaming services primarily to national, regional andlocal wireless carriers. We acquired 95% of the equity of Commnet in September2005 and the remaining 5% in January 2007.

·       Sovernet, Inc., (orSovernet), a facilities-based integrated voice, broadband data communicationsand dial-up service provider in New England, primarily in Vermont. We acquiredSovernet in February 2006 and granted restricted stock equal to 4% of Sovernet’soutstanding capital stock to Sovernet’s new Chief Executive Officer.

·       BermudaDigital Communications, Ltd. ( or BDC), the largest wireless voice anddata communications service provider in Bermuda, doing business under the nameCellular One. We acquired a minority equity interest in, and signed amanagement contract with, BDC in 1998. We currently own 43% of the capitalstock of BDC.

·       ChoiceCommunications, LLC (or Choice), is a leading provider of fixed wirelessbroadband data services, wireless digital television services and dial-upInternet services to retail and business customers in the U.S. Virgin Islands.We acquired Choice in October 1999 and own 100% of the equity of Choice.

As a holding company, we provide management, technical, financial,regulatory, and marketing services to, and typically receive a management feeequal to approximately 4% to 6% of revenues from, each operating subsidiary andour BDC affiliate. Because we do not control BDC, we account for our investmentin that entity under the equity method. Earnings from BDC do notappear in our income from operations, but are instead reflected in equityearnings of unconsolidated affiliates, net of tax in the Consolidated FinancialStatements included in this Report. In July 2008, BDC has theoption to repurchase from us all, but not less than all, of our equity interestin BDC at a price equal to fair market value. We currently think that BDC islikely to exercise this option. Also in 2008, our management fee arrangementwith BDC may be terminated pursuant to our contract.

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The followingchart summarizes the operating activities of our subsidiaries and our BDCaffiliate and the markets they serve as of March 31, 2007:
| Services             | ** ** | **Segment**                                                 | ** ** | **Operating Subsidiary/Affiliate** | ** ** | **Markets**                                      |
|----------------------|------------|-------------------------------------------------------------|------------|------------------------------------|------------|--------------------------------------------------|
| Wireless             |       | Rural Wireless  Integrated Telephony-International          |       | Commnet  GT&T  BDC(1)          |       | United States (rural markets)  Guyana  Bermuda   |
| Local Telephone  and |       | Integrated  Telephony-International                         |       | GT&T                           |       | Guyana                                           |
| Data                 |       | Integrated Telephony-Domestic  Wireless Television and Data |       | Sovernet  Choice (internet access) |       | United States (New England)  U.S. Virgin Islands |
| International  Long  |       | Integrated  Telephony-International                         |       | GT&T                           |       | Guyana                                           |
| Distance             |       |                                                        |       |                               |       |                                             |
| Other                |       | Wireless Television and  Data                               |       | Choice (digital  television)       |       | U.S. Virgin Islands                              |

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(1)             Earningsfrom BDC do not appear in our income from operations but are instead reflectedin equity in earnings of unconsolidated affiliates in the ConsolidatedFinancial Statements included in this Report.

For information about our business segments andgeographical information about our operating revenues and long-lived assets,see Note 8 to the Consolidated Financial Statements included in this Report.

In the past, we generated most of our revenue andoperating income from our GT&T operations. GT&Tprovides domestic wireline telephone service and international long distanceservice pursuant to an exclusive license from the Government of Guyana andprovides wireless service on a non-exclusive basis. The rates thatGT&T may charge for its services are regulated by the Public UtilityCommission of Guyana (or PUC), an independent regulatory body responsible forregulating telecommunications. See “Business—Regulation of Our GT&TSubsidiary” in the 2006 Form 10-K. The largest component of GT&T’scontribution to our consolidated revenue and profit has been from itsinternational long distance business and that business still accounts forroughly half of GT&T’s revenue. Most of these revenues and profits werefrom payment by foreign carriers, which are denominated in U.S. dollars, forhandling international long distance calls originating from foreign carrier’sterminating in Guyana. The rates at which GT&T collects fees from foreigncarriers are established by agreements between it and foreign carriers, and canbe affected by limits set by foreign telecommunications regulators, especiallythe U.S. Federal Communications Commission (or FCC). The primary drivers of thelong distance business are the population of Guyanese living abroad whoinitiate calls to Guyana, the rate foreign carriers pay GT&T for handlingthe incoming international calls, and the number of people in Guyana capable ofreceiving international long distance calls, which consist of wirelinetelephone customers and all the wireless subscribers in Guyana (includingsubscribers to competitor wireless service providers). In addition, in recentyears, we believe various methods of illegal bypass and alternative and cheapermedia for communication, such as e-mail and text messaging, may have had anegative impact on both voice traffic and on international long distancerevenues. We have taken a number of measures to counter illegal bypass,including taking action against unlicensed operators in Guyana, introducingspecial outbound call center rates and we are examining automated technicalsolutions as well.

In 2005 and 2006, we entered new businesses andmarkets through our acquisitions of Commnet and Sovernet. These businesses haveprovided us with new sources of revenues and with growth opportunities. As aresult, while GT&T continues to represent a majority of our revenues andprofits, its relative contribution to our consolidated revenues has declined inrecent years. GT&T generated approximately 63% and 60% of our consolidatedrevenues for the three months ended March 31, 2006 and 2007, respectively. Commnetgenerated approximately 68% and 65% of our wireless revenue for the threemonths ended March 31, 2006 and 2007, respectively, and accounted forapproximately 58% of the increase in wireless revenue over the correspondingperiod in 2006.

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Sovernet generated approximately 32% of our localtelephone and data revenue and accounted for more than 66% of the increase inlocal telephone and data revenue over the corresponding period in 2006.

We are actively evaluating additional acquisitionopportunities of businesses that meet our return-on-investment and otheracquisition criteria. As a result of our underwritten public offering of commonstock in July 2006, we raised net proceeds of approximately $46.3 million, ofwhich a portion was used to repay outstanding indebtedness, and the remainderof which we plan to use to fund capital expenditures, acquisitions and/orstrategic investments and general corporate purposes.

While our GT&T operations continue to grow, weface challenges in Guyana. Since 2001, the Government of Guyana has stated itsintention to introduce competition into Guyana’s wireline sector. Recently,senior Guyanese officials have indicated to us a renewed interest in conductingnegotiations between GT&T and the Government of Guyana regarding theexclusivity terms of GT&T’s license, and we expect these discussions willcover all significant outstanding issues, such as tax matters. GT&T has nothad formal discussions with Government officials regarding these matters sincethe second quarter of 2002. See “Business—Regulation of Our GT&T Subsidiary”in our 2006 Form 10-K. We believe that the introduction of international voiceand data competition would require the termination of the exclusivityprovisions of GT&T’s license, and thus would require appropriatecompensation to GT&T and a likely increase in local wireline service ratesso that those rates reflect the actual cost of providing such services.

On May 6, 2007, the Americas II undersea fiber opticcable, which is owned by a consortium of national and international carriers,including GT&T, and carries a substantial amount of telecommunicationstraffic to and from South America, suffered a fault in the cable in the oceanoff the coast of French Guiana. This has caused some disruption tointernational long distance traffic for Guyana, Suriname and French Guiana.  To minimize the disruption GT&T shiftedits international long distance traffic to its backup satellite capacitythrough Intelsat and purchased additional capacity to support the level oftraffic.  At this time, we estimate thatthe time to repair the Americas II cable will be about two weeks.  We do not expect that this disruption willhave a material adverse effect on our financial condition or results ofoperations during the second quarter.

In response to this temporary disruption, on May 9,2007, the Government of Guyana took the extraordinary action of unilaterallydirecting Digicel, our only nationwide wireless competitor, to carryinternational long distance traffic until the Americas II cable is restored tofull service.  While the Government hasstated that this is a temporary action, we believe that this action, takenwithout consulting, or prior notice to, GT&T, is a violation of GT&T’sexclusive license to provide international long distance services inGuyana.  At this time, GT&T hasinitiated legal actions seeking to rescind the interim authority and restrainDigicel and the Government of Guyana.

GT&T is also in the process of adapting to recentchanges in the competitive environment for wireless services in Guyana. Digicel’sentry into the Guyana wireless market in November 2006 has significantlyincreased the competition we face in the Guyana wireless market. Inanticipation of this development, we have accelerated the timing of some of ourcapital expenditures on network improvements. We believe that network coverageand quality of service are some of the most important bases on which we competeand represent competitive advantages for us because of our substantialinvestment in our network over time. During the last two quarters, we alsoincreased our marketing expense, including handset promotions and otherpromotions designed to accelerate the migration of subscribers from our TDMAnetwork to our GSM network, which allows us to offer richer handset featuresand certain wireless data services, while increasing our network capacity. Wehave also modified some of our pricing plans. We expect that this heightenedcompetition will result in higher marketing expense for us at least in the shortterm and may have adverse effects on pricing and our market share.

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**Results of Operations**

***Three Months EndedMarch 31, 2007 and 2006***
| ** **                                                                                              | ** ** | **Three Months Ended  March 31,** | ** ** | ** ** | ** ** | ** **                               | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|------------|------------|------------------------------------------|------------|
| ** **                                                                                              | ** ** | **2006**                                         | ** ** | **2007**   | ** ** | **Amount of  Increase  (Decrease)** | ** ** | **Percent  Increase  (Decrease)** | ** ** |
| ** **                                                                                              | ** ** | **(In thousands)**                          | ** ** |
| **REVENUE:**                                                                                            |       |                                             |       |       |       |                                     |       |   |   |
| Wireless                                                                                                |       | $                                                | 13,312     |       | $          | 18,172                                   |       | $ | 4,860 |   | 36.5 | % |
| Local telephone and data                                                                                |       | 9,191                                            |       | 11,467     |       | 2,276                                    |       | 24.8 |   |
| International long distance                                                                             |       | 11,171                                           |       | 12,920     |       | 1,749                                    |       | 15.7 |   |
| Other                                                                                                   |       | 847                                              |       | 978        |       | 131                                      |       | 15.5 |   |
| Total revenue                                                                                           |       | 34,521                                           |       | 43,537     |       | 9,016                                    |       | 26.1 |   |
| **OPERATING EXPENSES:**                                                                                 |       |                                             |       |       |       |                                     |       |   |   |
| Termination and access fees                                                                             |       | 5,285                                            |       | 6,177      |       | 892                                      |       | 16.9 |   |
| Internet and programming                                                                                |       | 750                                              |       | 849        |       | 99                                       |       | 13.2 |   |
| Engineering and operations                                                                              |       | 4,347                                            |       | 5,764      |       | 1,417                                    |       | 32.6 |   |
| Sales and marketing                                                                                     |       | 1,930                                            |       | 5,096      |       | 3,166                                    |       | 164.0 |   |
| General and administrative                                                                              |       | 4,847                                            |       | 5,850      |       | 1,003                                    |       | 20.7 |   |
| Depreciation and amortization                                                                           |       | 5,793                                            |       | 6,501      |       | 708                                      |       | 12.2 |   |
| Total operating expenses                                                                                |       | 22,952                                           |       | 30,237     |       | 7,285                                    |       | 31.7 |   |
| Income from operations                                                                                  |       | 11,569                                           |       | 13,300     |       | 1,731                                    |       | 15.0 |   |
| **OTHER INCOME (EXPENSE):**                                                                             |       |                                             |       |       |       |                                     |       |   |   |
| Interest income (expense), net                                                                          |       | (662                                             | )          | 369        |       | 1,031                                    |       | (155.7 | ) |
| Other income (expense), net                                                                             |       | 278                                              |       | 387        |       | 109                                      |       | 39.2 |   |
| Other income (expense), net                                                                             |       | (384                                             | )          | 756        |       | 1,140                                    |       | (296.9 | ) |
| **INCOME BEFORE INCOME TAXES, MINORITY INTERESTS  AND EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES** |       | 11,185                                           |       | 14,056     |       | 2,871                                    |       | 25.7 |   |
| Income taxes                                                                                            |       | 6,465                                            |       | 6,664      |       | 199                                      |       | 3.1 |   |
| **INCOME BEFORE MINORITY INTERESTS AND EQUITY IN  EARNINGS OF UNCONSOLIDATED AFFILIATES**               |       | 4,720                                            |       | 7,392      |       | 2,672                                    |       | 56.6 |   |
| Minority  interests, net of tax                                                                         |       | (1,097                                           | )          | (949       | )          | 148                                      |       | (13.5 | ) |
| Equity in  earnings of unconsolidated affiliates, net of tax                                  |       | 466                                              |       | 455        |       | (11                                      | )          | (2.4 | ) |
| **NET INCOME**                                                                                          |       | $                                                | 4,089      |       | $          | 6,898                                    |       | $ | 2,809 |   | 68.7 | % |

 

Period to period comparisons are affected by ouracquisitions. We acquired Sovernet on February 10, 2006.

*Wirelessrevenue.**  *Wirelessrevenue includes wholesale voice and data roaming revenue from our rural U.S.operations and retail wireless revenues generated in Guyana, including airtimeand activation fees.

Wireless revenue increased to $18.2 million for thethree months ended March 31, 2007 from $13.3 million for the three months endedMarch 31, 2006, an increase of $4.9 million, or 37%. Growth in our rural U.S.business was responsible for $2.8 million of this increase due primarily tocontinued deployment of additional GSM and CDMA wireless base stations, with atotal of 278 base stations deployed as of March 31, 2007 as compared to 273base stations as of March 31, 2006. Of the total base stations, 229 were GSMand CDMA base stations as of March 31, 2007, as compared to 154 GSM and CDMAbase stations as of March 31, 2006. Our rural wireless revenue also increasedas a result of growth in voice and data traffic (minutes) at existing sites, 

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growth in data roaming revenue and new internationalroaming revenue. The remaining increase in wireless revenue was attributable tothe continued growth of our wireless subscriber base in Guyana and certainnon-recurring events during the quarter such as Guyana’s hosting of CricketWorld Cup matches and the Rio Group Summit. Our wireless subscribers in Guyanaincreased by 64,000, or 26%, from 246,000 subscribers to 310,000 subscribers asof March 31, 2006 and 2007, respectively. Such increase in subscribers wasaided by the Company’s handset promotions throughout the quarter. GT&T’s wirelessrevenue was $4.3****million and $6.3 million for thefirst quarter of 2006 and 2007, respectively. While we experienced wirelessrevenue and subscriber growth in Guyana, we believe that some of oursubscribers also own handsets and are subscribers of our competitor, which iscommon in a region of the world with a high percentage of prepaid subscribers.Approximately 262,000 of GT&T’s wireless subscribers were GSM/GPRSsubscribers as of March 31, 2007 as compared to 136,000 as of March 31, 2006.

We expect that wholesale wireless revenue from ourrural U.S. network will continue to increase in 2007 as we continue to expandour GSM and CDMA networks and as minutes of use continue to grow on ourexisting sites. This may be offset, in part, by scheduled and negotiatedreductions in rates. In our retail wireless business, we expect that thenetwork capacity and coverage we have added will lead to increased revenue,although competitive pressures may reduce expected growth or even cause adecline in this revenue. On November 1, 2006, Digicel, a large mobiletelecommunications company operating in many Caribbean countries, announcedthey completed the purchase of our nationwide wireless competitor in Guyana andplanned to invest significant sums in expanding the service offerings andnetwork capability of this rival network. They have already expanded networkcapacity and launched extensive promotions, particularly handset subsidies, andcompleted a new brand launch in February 2007. In turn, we have continued andexpanded upon our promotions, including substantial handset promotions and havealso accelerated our capital build plan to more rapidly increase our geographiccoverage and our GSM network capacity and capabilities.

*Local telephone and datarevenue.*Local telephone anddata revenue is generated by our wireline operations in Guyana, our integratedvoice and data operations in Vermont, and our data services in the U.S. VirginIslands. This revenue includes basic service fees, measured service revenue,and Internet access fees, as well as installation charges for new lines,monthly line rental charges, long distance or toll charges (excludinginternational long distance charges in Guyana), maintenance and equipmentsales.

Local telephone and data revenue increased by $2.3million, or 25%, to $11.5 million for 2007 from $9.2 million for 2006. Of the$2.3 million increase, the inclusion of a full quarter of results for Sovernet,our Vermont based voice and data provider, which was acquired inFebruary 2006, contributed $1.5 million. The remaining increase of $0.8million is primarily attributable to growth in GT&T’s access lines inGuyana from approximately 114,000 lines as of March 31, 2006 to approximately123,000 lines as of March 31, 2007 (an increase of 8%), growth in broadbanddata customers in Guyana and continued strong growth in wireless broadbandcustomers in the U.S. Virgin Islands. In future periods, we anticipate thatlocal telephone and data revenue will increase as a result of network andsubscriber growth in Guyana, the U.S. Virgin Islands and Vermont, particularlyin the small and medium sized businesses, including neighboring areas of NewEngland.

*Internationallong distance revenue.* International long distance revenue,all of which is generated by our GT&T subsidiary by international telephonecalls into and out of Guyana, which includes calls made by visitors to Guyanaon their mobile phones, does not include international long distance revenuegenerated by our U.S. businesses. Inbound traffic, which made up 86% of allinternational long distance traffic and more than three quarters ofinternational long distance revenue for the three months ended March 31, 2007,is settled in U.S. dollars.

International longdistance revenue was $12.9 million during the first quarter, an increase of$1.7 million, or 15%, from $11.2 million in 2006. This increase resulted from asubstantial growth in wireless subscribers within Guyana (for both GT&T andits competitor, which uses GT&T’s international network) and certainnon-recurring events during the quarter such as Guyana’s hosting of CricketWorld Cup matches and the Rio Group Summit, which helped drive traffic volumesto unexpected levels. While overall Internet penetration

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in Guyana is modest, we continue to review measures tocounter any illegal bypass of our exclusive right to handle international voiceand data traffic. In addition to the illegal bypass via the Internet,technological change has offered alternative and cheaper media forcommunication, such as e-mail and text messaging. This shift in modes ofcommunication may cause a decline in both voice traffic and in internationallong distance revenues.

*Otherrevenue*.Other revenue represents revenue from digital television services in the U.S.Virgin Islands, which increased 25% to $1.0 million for 2007 from $0.8 millionfor 2006. The increase in television services was a result of a 11% increase intelevision subscribers, including additional hotel rooms. The increase alsoreflects a price increase in February 2006. In the near-term, we expect thiscategory of revenue will largely be driven by our television subscriber basewhich we expect to continue to increase, although likely at a lower rate thanin 2006.

*Termination and access feeexpenses*. Termination andaccess fee expenses are charges that we pay for voice and data transportcircuits (in particular, the circuits between our rural wireless sites and ourswitches), Internet capacity and other access fees we pay to terminate ouroutbound toll and international calls.

Termination and access fees increased by $0.9 million,or 17%, from $5.3 million to $6.2 million from 2006 to 2007, respectively. Thisincrease was due to a full quarter of operations of Sovernet as well asincreased traffic growth at GT&T and Commnet, including the cost ofpurchasing additional short-term satellite capacity to support events in Guyanain the first quarter. These expenses are expected to increase in future periodsas our rural wireless and CLEC operations in Vermont expand.

*Internet and programmingexpenses.*Internet andprogramming expenses include digital television programming costs as well asInternet connectivity charges.

Internet and programming expenses increased from $0.7 millionin 2006 to $0.8 million in 2007. This increase was primarily from the growth inour television and broadband data subscribers in the U.S. Virgin Islands. InDecember 2006, we were able to significantly reduce the Internet capacityexpenses for our U.S. Virgin Island operations which will offset partly theincreases related to expanding television and broadband operations.

*Engineering and operationsexpenses.*Engineering andoperations expenses include the expenses associated with developing, operating,supporting and expanding our networks including the salaries and benefits paidfor employees directly involved in the development and operation of ournetworks.

Engineering and operations expenses increased by $1.5million, or 35%, from $4.3 million to $5.8 million for 2006 to 2007,respectively. This increase is primarily the result of the expansion of ourwireless networks in the United States and Guyana. We expect that engineeringand operations will continue to increase to further support those networks.

*Sales and marketingexpenses.*Sales, marketingand customer service expenses include salaries and benefits we pay for salespersonnel, customer service expenses, sales commissions and the costsassociated with the development and implementation of our promotion andmarketing campaigns.

Sales and marketing expenses increased by $3.2million, or 168%, from $1.9 million to $5.1 million from 2006 to 2007,respectively. Of this increase, $3.0 million is attributable to increased salesand marketing efforts at GT&T in order to address increased wirelesscompetition in Guyana. Such sales and marketing efforts included wirelesshandset promotions, advertising and increased sales commissions. While we donot expect to continue such marketing efforts indefinitely at the level thatwas incurred during the first quarter of 2007, we may need to continue to beaggressive in GT&T’s marketing activities in order to address thisincreased competition.

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*General and administrativeexpenses.*General andadministrative expenses include salaries, benefits and related costs forgeneral corporate functions, including executive management, finance andadministration, legal and regulatory, facilities, information technology andhuman resources.

General and administrative expenses increased by $1.1million, or 23%, from $4.8 million to $5.9 million from 2006 to 2007,respectively. This increase is primarily attributable to a full quarter ofoperations at Sovernet and an increase in accounting and professional feesrelating, in part, to Sarbanes-Oxley internal controls compliance, as well asan increase in non-cash equity based compensation and additional compensationand overhead costs to support our growth.

*Depreciation and amortizationexpenses.* Depreciation and amortization expenses representthe depreciation and amortization charges we record on our property andequipment and on our intangible assets.

Depreciation and amortization expenses increased by$0.7 million, or 12%, from $5.8 million to $6.5 million for 2006 and 2007, respectively.The increase is primarily due to the addition of fixed assets as well as theamortization of intangible assets at Sovernet. We expect that depreciation andamortization expenses will increase in the near-term, because of continuedcapital expenditures to expand our networks.

*Interest expense.* Interest expenserepresents interest incurred on our outstanding debt including our $50.0million term loan as well as the outstanding amounts under our $20.0 millionrevolving line of credit.

Interestexpense decreased from $0.9 million for 2006 to $0.2 million for 2007. Thisdecrease is primarily the result of a decrease in the average outstandingbalance under our line of credit during 2007 as compared to 2006 when we usedborrowings from the revolving line of credit to help fund certain acquisitions.We used a portion of the proceeds from the underwritten public offering of ourcommon stock in July 2006 to repay those borrowings and had no outstandingborrowings under the line of credit as of March 31, 2007. The decrease ininterest expense was also due to the receipt of patronage income received fromour lender during 2007.

*Interest income*. Interest incomerepresents interest earned on our cash and cash equivalent balances.

Interestincome increased from $0.2 million to $0.6 million for 2006 and 2007,respectively, due to an overall increase in our cash balances as result of theunderwritten public offering of our common stock in July 2006.

*Other income (expense).*Other income(expense) represents miscellaneous non-operational income we earned, orexpenses we incurred, including management fees received from BDC and otherunconsolidated affiliates. Other income increased from $0.3 million in 2006 to$0.4 million in 2007 as a result of a gain on the sale of equity interests insome of Commnet’s unconsolidated affiliates.

*Income taxes.**  *Income taxes represent taxes we payon our net taxable income.

The effective taxrate was 58% and 47% for 2006 and 2007, respectively, which represents thestatutory U.S. income tax rate plus the Guyanese income taxes in excess of thestatutory U.S. income tax rates as well as certain U.S. state income taxes. Theeffective tax rate is also impacted by the amortization of a deferred taxasset, relating to differences between book and tax basis of fixed assets,which was recorded in a prior period. The reduction in our effective rate in2007 is a result of the impact of increased taxable income at U.S. statutoryrates which are significantly lower than the Guyana statutory rates as well asa reduction in the losses in the US Virgin Islands. We expect that oureffective tax rate should remain fairly consistent with the first quarter of2007 throughout the year.

*Minorityinterests.*For 2007,minority interests consisted of the Guyana government’s 20% interest in 

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GT&T, a minority shareholder’s 4% interest in Sovernetand other minority shareholders’ interests in certain consolidated subsidiariesof Commnet. For 2006, minority interests also included a minority shareholder’s5% interest in Commnet which we acquired on January 1, 2007. The acquisition ofthat 5% minority interest in Commnet was the primary reason that consolidatedminority interests decreased from $1.1 million to $0.9 million for 2006 and2007, respectively.

*Equityin earnings of unconsolidated affiliates.* Equity in earningsof unconsolidated affiliates includes our share of the earnings of BDC as wellas our share of the earnings of Commnet’s unconsolidated affiliates. Equity inearnings of unconsolidated affiliates was unchanged at $0.5 million for 2006and 2007, respectively. Wireless subscribers in Bermuda were 22,248 at March31, 2006 and 21,189 as of March 31, 2007.

*Net income.*As a result of the abovefactors, net income increased by $2.8 million or 68% from $4.1 million for 2006to $6.9 million for 2007. On a per share basis, net income increased from $0.33per basic and diluted share to $0.46 per basic and $0.45 per diluted share from2006 to 2007, respectively.

*Segment results.*We have four materialoperating segments, which we manage and evaluate separately: (1) IntegratedTelephony — International; (2) Integrated Telephony — Domestic; (3) WirelessTelevision and Data; and (4) Rural Wireless. Segment results are set forth inNote 8 “Segment Reporting” to the Consolidated Financial Statements included inthis Report.

The followingchart summarizes the operating activities of our segments and subsidiaries andthe markets they serve as of March 31, 2007:

 
| Segment                       | ** ** | **Operating Subsidiaries/Affiliate*** | ** ** | **Markets**                    | ** ** | **Services**                |
|-------------------------------|------------|---------------------------------------|------------|--------------------------------|------------|-----------------------------|
| Integrated Telephony —   |       | GT&T                              |       | Guyana                         |       | Wireless                    |
| International                 |       | GT&T                              |       | Guyana                         |       | International Long Distance |
|                          |       | GT&T                              |       | Guyana                         |       | Local Television and Data   |
| Integrated Telephony —   |       | Sovernet                              |       | United States (New  England)   |       | Local Television and  Data  |
| Domestic                      |       |                                  |       |                           |       |                        |
| Wireless Television and  Data |       | Choice (internet access)              |       | U.S. Virgin Islands            |       | Local Television and  Data  |
|                          |       | Choice (digital television)           |       | U.S. Virgin Islands            |       | Other                       |
| Rural Wireless                |       | Commnet                               |       | United States (rural  markets) |       | Wireless                    |

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*                    Earningsfrom BDC do not appear in our income from operations, but are instead reflectedin equity in earnings of unconsolidated affiliates, in the ConsolidatedFinancial Statements included in this Report.

**Regulatory and Tax Issues**

We are involved in a number of regulatory and taxproceedings**.**See Note 9 to theConsolidated Financial Statements included in this Report. A material andadverse outcome in one or more of these proceedings could have a materialadverse impact on our financial condition and future operations.

**Liquidity and Capital Resources**

We have met our operational liquidity needs through acombination of cash on hand and internally generated funds and have fundedcapital expenditures and acquisitions with a combination of internallygenerated funds, cash on hand and borrowings under our credit facility.

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***Uses of Cash***

*Capital Expenditures.*A significant use of our cash has been on capitalexpenditures for expanding and upgrading our networks. For the three monthsended March 31, 2006 and 2007, we spent approximately $5.1 million and $8.9million on capital expenditures, respectively.

*Of the $8.9 million of 2007 capitalexpenditures, we spent approximately $3.5 million expanding Commnet’s networkby increasing the number of GSM and CDMA base stations including the purchaseof spectrum licenses and switching and cell site equipment required to expandour geographic coverage and technical capabilities. In addition, approximately$4.9 million was incurred expanding the capacity and coverage of our wirelessnetwork in Guyana bringing the total amount invested in our Guyanesetelecommunications infrastructure to approximately $255 million. We also spent$0.5 million at Sovernet and expanded our service areas and switchcapabilities.*

In 2007, we are continuing to invest in expanding ournetworks in Guyana, Commnet and Sovernet and expect to incur capitalexpenditures between $43 million and $48 million, with over half made inconnection with Commnet. We expect to fund these expenditures from cashgenerated from our operations.

*Acquisitions.*We have funded our recent acquisitions with acombination of cash on hand and borrowings under our $70 million creditfacility.

*During the quarter ended March 31,2007, we purchased the remaining 5% equity interest in Commnet for $6.5 millionand 21,000 shares of our common stock in satisfaction of our obligation (and inaccordance with our right) under and consistent with the terms of the agreemententered into in connection with our acquisition of Commnet in September 2005. Wefunded this purchase with cash on hand and the reissuance of shares held in ourtreasury.*

*During the quarter ended March 31,2006, we completed the acquisition of Sovernet, Inc. for approximately$13.2 million, net of $1.5 million of cash acquired. In addition, Commnetacquired the equity interests of its majority partners in its wireless roamingnetworks located in northeast Missouri for $6.2 million, net of cash acquiredof $0.2, million and also acquired a small wireless network in central Arizonafor $1.7 million. We funded all three of these transactions through acombination of cash on hand and borrowings on our existing credit facility.*

We continue to explore opportunities to acquirecommunications properties or licenses in the Caribbean, the United States andelsewhere. Such acquisitions may require external financing. While therecan be no assurance as to whether, when or on what terms we will be able toacquire any such businesses or licenses, such acquisitions may beaccomplished through the issuance of shares, payment of cash or incurrence ofdebt.

*Dividends andDistributions.*We use cash onhand to make dividend payments to our common stockholders when declared by ourBoard of Directors. For the three months ended March 31, 2007, our dividends toour stockholders approximated $2.1 million (which reflects dividends paid onJanuary 10, 2007). We have paid quarterly dividends for the last 34 fiscalquarters. Also our Board of Directors approved a $5.0 million stock buybackplan in September 2004 pursuant to which we have spent to date $916,130repurchasing common stock. Although we currently do not intend to makeadditional repurchases of common stock under this plan, we may act to doso in the future, depending on market conditions and our cash needs.

***Sources of Cash***

*Total Liquidity at March31, 2007*. As of March 31,2007, we had approximately $56.7 million in cash and cash equivalents, adecrease of $3.8 million from the December 31, 2006 balance of $60.5 million.We believe our existing cash balances and other capital resources, includingthe $20 million available under our 

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* *

revolving line of credit included in our creditfacility, are adequate to meet our current operating and capital needs.

*Cash Generated by Financing Activities.*Inthe third quarter of 2006, we completed the sale of 3.84 million shares of commonstock at $19.00 per share in an underwritten public offering, consisting of thesale by us of an aggregate of 2.64 million shares (2.4 million shares in July2006 and an additional 0.24 million shares purchased by the underwriters as apart of their over-allotment option in August 2006) and 1.2 million shares byour Executive Chairman Cornelius B. Prior, Jr. and related entities. Our netproceeds of this offering, which were approximately $46.3 million, were used torepay a portion of our outstanding indebtedness, and will fund capitalexpenditures, acquisitions and/or strategic investments and general corporatepurposes. We did not receive any proceeds from the sale of shares by theselling stockholders.

*Cash Generated byOperations.*Cash provided by operatingactivities was $13.5 million for the three months ended March 31, 2007 comparedto $12.9 million for the three months ended March 31, 2006.

*Credit Facility.*On September 15, 2005, AtlanticTele-Network entered into a Credit Agreement with CoBank, ACB providing for acredit facility consisting of a $50 million term loan and a $20 millionrevolving credit facility. Under the term loan, repayments of principal aredeferred until the maturity of the loan on October 31, 2010. Interest onthe term loan is payable on a quarterly basis at a fixed annual interest rateof 5.85%. Because CoBank is a cooperative financial institution, we expect toreceive patronage payments annually, and at the end of the term, from CoBankwhich reflect our portion of CoBank’s profits, if any. These payments, ifreceived, are expected to reduce our effective interest expense on the termloan. For 2006 and 2007, our patronage approximated $148,000 and $500,000 . Halfof these patronage amounts was received in cash while the remaining half wasreceived as equity in our lending institution.

***Factors Affecting Sources of Liquidity***

*InternallyGenerated Funds.**  *The keyfactors affecting our internally generated funds are demand for our services,competition, regulatory developments, economic conditions in the markets wherewe operate our businesses and industry trends within the telecommunicationsindustry. For a discussion of tax and regulatory risks in Guyana that couldhave a material adverse impact on our liquidity, see “Business—RiskFactors—Risks Relating to Our Wireless and Wireline Services in Guyana,” and “—Regulationof Our GT&T Subsidiary” in our 2006 Form 10-K and Note 9 to theConsolidated Financial Statements included in this Report.

*Guyana—U.S.Foreign Currency Exchange.**  *Historically,the Guyana dollar has been considerably devalued relative to the U.S. dollar.The current exchange rate is approximately $205 Guyana dollars to $1 U.S.dollar. We use U.S. dollars to make GT&T capital expenditures, to paycertain GT&T liabilities and to value our GT&T assets for the purposeof making our Guyanese rate of return calculation. Unfavorable changes in theGuyana dollar- U.S. dollar exchange rate would reduce our purchasing power inthese areas. The continued expansion of GT&T’s network is dependent uponthe ability of GT&T to purchase equipment with U.S. dollars.

While currently a significant portion of GT&T’srevenues are transacted in U.S. dollars, this circumstance could change in thefuture. As a result of the rate increases previously awarded to, and by,GT&T, the growth of GT&T’s local exchange operations and the generaltrend toward lower international settlement rates, it is likely that anincreasing portion of our revenues will be earned in Guyanese currency. Whilethere are no legal restrictions on the our conversion of Guyanese currency intoU.S. dollars or other hard currencies, or on the expatriation of Guyanesecurrency or foreign currency from Guyana, there are risks associated with theconversion of Guyanese dollars to U.S. dollars due to limited liquidity in theGuyana foreign currency markets. This limited liquidity has not prevented usfrom converting Guyanese currency into U.S. dollars within a given three monthperiod or from converting at a price that reasonably approximates the reportedexchange rate.

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While we believe that GT&T has, and will continueto have, adequate cash flows denominated in U.S. currency to meet its currentoperating, debt service and capital requirements, there can be no assurancethat GT&T will be able to convert its Guyana currency earnings into theU.S. currency needed to meet such obligations. As of March 31, 2007, we had$6.4 million of cash held in Guyanese dollars. See “Quantitative andQualitative Disclosures about Market Risk.”

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*Restrictions Under CreditFacility.**  *Ourcredit facility contains four financial tests with which Atlantic Tele-Networkmust comply:

·       a total leverage ratio(debt to EBITDA) of 2.00 to 1.00 or less;

·       a debt service coverageratio (EBITDA to debt service) of 3.00 to 1.00 or more; and

·       an equity to assets ratioof 0.40 to 1.00 or more.

In addition, Commnet must comply with a leverage ratiotest (debt of Atlantic Tele-Network and its subsidiaries, net of pledged cash,to EBITDA of Commnet and its subsidiaries) of 5.75 to 1.00, which will decreaseto 5.00 to 1.00 at July 1, 2007. As of March 31, 2007, we were incompliance with the covenants of the credit facility.

*CapitalMarkets.**  *Ourability to raise funds in the capital markets depends on, among other things,general economic conditions, the conditions of the wireless industry, ourfinancial performance and the state of the capital markets. In June 2006, theSecurities and Exchange Commission declared effective a “universal” shelfregistration statement filed by us. This shelf registration statementregistered the potential future offerings by us, from time to time up to anaggregate of $200 million of our securities, consisting potentially of commonstock, debt securities, and other equity and convertible securities andcombination of the foregoing. Following our July 2006 equity offering which wasconducted pursuant to the shelf registration statement, we have approximately$127 million of securities registered for potential offerings.

***Inflation***

We do not believe that inflation has had a significantimpact on our consolidated operations in any of the periods presented in theReport.

***Recent Accounting Pronouncements***

In February 2007, the FASB issued StatementNo. 159 (“SFAS 159”), The Fair Value Option for Financial Assets andLiabilities Including an Amendment of FASB Statement No. 115. Thisstandard is effective for periods beginning after November 15, 2007,therefore, we will adopt the provisions of the standard on January 1,2008. SFAS 159 permits us to elect to measure certain of its financialinstruments at either historical cost or fair value. We are in the process ofdetermining what method it will choose upon adoption and, once determined, theimpact, if any, adoption will have on our financial results or position.

On January 1, 2007, we adopted FASB Interpretation No.48 (“FIN 48”), Accounting for Uncertainty in Income Taxes—an interpretation ofFASB Statement No. 109, which clarifies the accounting for uncertainty in taxpositions. FIN 48 requires us to recognize the impact of a tax position in ourfinancial statements if that position is more likely than not of beingsustained on audit, based on the technical merits of the position. The adoptiondid not have a material impact on our results of operations or financialposition.

We evaluated our uncertain tax positions relating toits various tax matters and rulings in Guyana and determined that no adjustmentwas to be recorded to the estimated settlement amounts previously recordedprior to the adoption of FIN 48. As noted in Note 11 to the 2006 Form 10-K, dueto various arrangements and relationships in place with the government ofGuyana, there is no expectation that interest and penalties will be assessedupon reaching final settlement of the matters. There is no expected settlementdate and upon settlement, which might not occur in the near future, the paymentmay vary significantly from the amounts currently recorded. We will continue toupdate amounts recorded as new developments arise.

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**Item 3.Quantitative and Qualitative Disclosures about Market Risks**

Although asignificant portion of our Guyana subsidiary’s revenues and expenditures arecurrently transacted in U.S. dollars, the results of future operationsnevertheless may be affected by changes in the value of the Guyana dollar.From February 1991 until early 1994, the Guyana dollar remained relativelystable at the rate of approximately $125 to the U.S. dollar. In 1994 the Guyanadollar declined in value to approximately $142 to the U.S. dollar. It remainedrelatively stable at approximately that rate through 1997. FromDecember 31, 1997, through December 31, 1998 the Guyana dollarfurther declined in value to approximately $180 to the U.S. dollar and itremained relatively stable until late 2003. In the fourth quarter 2003, theGuyana dollar declined in value to approximately $195 to the U.S. dollar and toapproximately $205 during the first quarter of 2004. Since the first quarter of2004 through March 2007, the value of the Guyana dollar has remained at $205Guyana dollars to one U.S. dollar. 

A substantialmajority of our consolidated cash balances are kept in U.S. dollar denominatedshort term investments. GT&T generally endeavors to maintain a balancebetween its Guyana dollar cash deposits and local receivables which aredenominated in Guyana dollars and its local tax and other payables which arealso denominated in the Guyana dollar. As of March 31, 2007, GT&Tmaintained $6.4 million of its cash balances in Guyana dollars.

GT&T’sfunctional currency has been the U.S. dollar because a significant portion ofGT&T’s revenues and expenditures have been transacted in U.S. dollars.Accordingly, in our view, GT&T is currently entitled to its agreed uponminimum 15% return on rate base computed in U.S. dollars on a U.S. dollarhistorical cost rate base and therefore devaluations of the Guyana dollarshould have had no long-term impact on the value of GT&T’s earnings in U.S.dollars. The Guyana Public Utility Commission has neither approved nordisapproved of our position. Moreover, with the decline in internationalsettlement rates and the increases that GT&T hopes to have in localrevenue, it is possible that the Guyana dollar will become GT&T’sfunctional currency at some time in the future. See “Management’s Discussionand Analysis of Financial Condition and Results of Operations” above.

We maintain aportion of our cash and cash equivalents in short-term financial instrumentsthat are subject to interest rate fluctuations. Due to the relatively shortduration of such instruments and the fact that we have no variable rate debt,we believe that fluctuations in interest rates will not materially affect ourfinancial condition or results of operations.

**Item 4.Controls and Procedures**

*Evaluationof disclosure controls and procedures.*Our management, withthe participation of our principal executive officer and principal financialofficer, evaluated the effectiveness of our disclosure controls and proceduresas of March 31, 2007. The term “disclosure controls and procedures,” as definedin Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controlsand other procedures of a company that are designed to ensure that informationrequired to be disclosed by a company in the reports that it files or submitsunder the Exchange Act is recorded, processed, summarized and reported, withinthe time periods specified in the SEC’s rules and forms. Disclosure controlsand procedures include, without limitation, controls and procedures designed toensure that information required to be disclosed by a company in the reportsthat it files or submits under the Exchange Act is accumulated and communicatedto the company’s management, including its principal executive and principalfinancial officers, as appropriate to allow timely decisions regarding requireddisclosure. Management recognizes that any controls and procedures, no matterhow well designed and operated, can provide only reasonable assurance ofachieving their objectives and management necessarily applies its judgment inevaluating the cost-benefit relationship of possible controls and procedures.Based on the evaluation our disclosure controls and procedures as of March 31,2007, our principal executive officer and principal financial officer concludedthat, as of such date, our disclosure controls and procedures were effective atthe reasonable assurance level.

*Changesin internal control over financial reporting.*There was nochange in the internal control over financial reporting that occurred duringthe three months ended March 31, 2007 that has materially affected, or isreasonably likely to materially affect, our internal control over financialreporting.

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**PART II—OTHER INFORMATION**

**Item 1.Legal Proceedings**

See Note 9 to the Consolidated Financial Statementsincluded in this Report.

**Item1A. Risk Factors**

In addition to the other information set forth in thisReport, you should carefully consider the factors discussed in Part I, “Item1A. Risk Factors” in our 2006 Form 10-K, which could materially affect ourbusiness, financial condition or future results. The risks described in our2006 Form 10-K are not the only risks facing our Company. Additional risksand uncertainties not currently known to us or that we currently deem to beimmaterial also may materially adversely affect our business, financialcondition and/or operating results.

**Item 2.Unregistered Sales of Equity Securities and Use of Proceeds**

On January 1, 2007, we issued 21,000 shares of ourcommon stock to Brian A. Schuchman in partial payment of the purchase price forMr. Schuchman's 5% equity interest in Commnet. In connection with our acquisition of Commnet in September 2005, weentered into a put and call agreement with Mr. Schuchman, Chairman of the Boardof Commnet and the remaining minority equity holder in Commnet, under which wewere obligated to acquire Mr. Schuchman’s equity interest between April 15 andOctober 15, 2007 at a purchase price based on a fixed multiple to a predefinedearnings number based on Commnet’s financial results during the 12 month periodprior to the exercise of the put and call. On January 1, 2007, prior to theagreed upon purchase period, but consistent with the pricing calculationprovided for in the put and call agreement, we purchased Mr. Schuchman’s equityinterest for $6.5 million in cash and 21,000 shares of our common stock.  We issued the shares of common stock in relianceon the exemption from the registration provisions of Section 4(2) of theSecurities Act of 1933, as amended (and the regulations promulgated thereunder,including Regulation D) relating to sales by an issuer not involving a publicoffering.

Under the related purchase agreement, Mr. Schuchmanrepresented to us, among other things, that he was an accredited investor andthat he was acquiring the shares of common stock for investment and not fordistribution.

**Item 6. Exhibits-**

3.1                                 RestatedCertificate of Incorporation (incorporated by reference to Exhibit 4.1 tothe Company’s Registration Statement on Form S-8 (File No. 333-62416)filed June 6, 2001)

3.2                                 Certificateof Amendment to the Restated Certificate of Incorporation, as filed with theDelaware Secretary of State on August 14, 2006 (incorporated by referenceto Exhibit 3.2 of the Company’s Quarterly Report on Form 10-Q (FileNo. 001-12593) filed on August 14, 2006)

31.1                           Certificationof Chief Executive Officer pursuant to Rule 13a-14(a) of theSecurities Exchange Act of 1934, as adopted pursuant to Section 302 of theSarbanes-Oxley Act of 2002

31.2                           Certificationof Chief Financial Officer pursuant to Rule 13a-14(a) of theSecurities Exchange Act of 1934, as adopted pursuant to Section 302 of theSarbanes-Oxley Act of 2002

32.1                           Certificationof Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2                           Certificationof Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adoptedpursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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**SIGNATURES**

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.
|                    |   | Atlantic Tele-Network, Inc.      |
|--------------------|--------|---------------------------------------|
|               |   |                                  |
| Date: May 10, 2007 |   | /s/ Michael T. Prior                  |
|               |   | Michael T. Prior                      |
|               |   | President and Chief Executive Officer |
|               |   |                                  |
| Date: May 10, 2007 |   | /s/ Justin D. Benincasa               |
|               |   | Justin D. Benincasa                   |
|               |   | Chief Financial Officer and Treasurer |

 

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